Following the general election in Austria on September 29, the incoming government will face increasing demands to diversify its energy sources away from Russian gas, amid a struggling economy.
Current opinion polls suggest no party will secure an outright majority. The far-right Freedom Party (FPÖ), known for its pro-Russian stance, holds a narrow lead. The election outcome could significantly impact the pace of Austria’s energy transition.
Since Russia’s invasion of Ukraine in 2022, the European Union has been working to replace Russian gas imports quickly. However, alternative energy sources often come at a higher cost, contributing to inflation driven by both the pandemic and the ongoing war.
Stefan Schiman-Vukan, a senior economist at the Austrian Institute of Economic Research, noted that “other countries aren’t happy Austria is still consuming such large volumes of Russian gas.” He emphasized the strong political pressure to reduce this dependence.
The EU aims to phase out Russian gas by 2027, and Austria’s Green-led energy ministry is pushing to expedite this transition. Yet, as of July, Austria was still importing 83% of its gas from Russia, compared to just 15% for the EU overall.
The Greens, who are part of the current government, have advocated for alternative energy supplies. Chancellor Karl Nehammer’s conservative ÖVP also supports reducing reliance on Russian gas. The energy ministry pointed out that Austria has established long-term plans for gas independence, citing sufficient import capacity through Germany and Italy, as well as gas storage facilities that are over 90% full.
“The high dependence on Russian gas supplies is a major economic and security risk for Austria,” the ministry stated. “It is essential to reduce gas consumption and stop purchasing Russian gas.”
Despite this, the FPÖ argues that Russian gas should remain part of Austria’s energy strategy, although its support appears to be dwindling. Polls indicate FPÖ support is around 27-29%, with their lead shrinking to just a point over the ÖVP, and three other parties poised to gain close to 10% or more.
The other political parties have rejected forming a coalition with FPÖ leader Herbert Kickl, which may lead to coalitions more committed to reducing ties with Russia. A coalition with the ÖVP seems likely.
The new government will also have to address an economy projected to contract by 0.7% this year, marking a second consecutive year of decline.
Efforts to diversify energy sources are progressing. Vienna’s main power company, Wien Energie, announced plans to stop using Russian gas by 2025.
However, concerns about an energy shortage have arisen since Ukraine announced it would not extend a deal with Gazprom, which expires at the end of 2024. If Russian gas supplies were suddenly cut off, wholesale prices could rise by 20% for two to six months, according to Walter Boltz, former head of utility regulator E-Control.
Officials remain optimistic, citing a recent study indicating that imports from Italy and Germany, along with reserves, would meet Austria’s needs.
As politicians seek to boost the economy, both the FPÖ and ÖVP have proposed tax cuts, while the center-left Social Democrats suggest implementing wealth and inheritance taxes.
Gunter Deuber, chief economist at Raiffeisen Bank International, highlighted Austria’s situation, stating, “If you’re uncompetitive in terms of costs and wages, people stop investing, and it becomes less attractive to produce in Austria.”
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